Morgan Stanley Real Estate Investing on Tuesday said it had formed a joint venture with NVR Inc. (NYSE:NVR) and a Texas developer called CoastOak Group to acquire a land portfolio comprised of approximately 5,600 fully entitled and mostly undeveloped residential lots in nine separate master planned communities located in the Washington, D.C. metropolitan area.

No purchase price or ownership positions among the partners were announced, though MSREI said in a press release that CoastOak Group will manage the day-to-day operations of the portfolio on behalf of the MSREI/NVR venture. NVR already had options on much of the portfolio.

In a research alert to investors, Stephen East at Ticonderoga Securities said he believed the JV paid approximately $83.5M, with the majority of the lots in Loudoun county, Virginia. "After factoring out the finished lots, if the $83.5M is the total, we believe the JV paid about $70K to $75K per acre," East wrote. "Throw in additional development costs that could be in the ballpark of $100K per lot and it is obvious that NVR and its partners have made a very sizable investment."

"We are delighted to have completed the acquisition of this strategic land portfolio in partnership with NVR, a best-in-class homebuilder," said John Klopp, co-CEO and co-chief investment officer of MSREI. "The purchase provides our partnership with a sizeable portfolio of well-located residential lots in the Washington, D.C. area, one of the strongest and most supply-constrained residential markets in the United States."

For NVR, traditionally a merchant builder with light land positions, the deal marks the second significant land deal it has made recently. In his note, East wrote, "Regardless of the ultimate development costs, this pales in comparison to its 2010 D.C. metro deal in which it bought 890 paper (raw) lots for $78M."

NVR has neither commented nor filed with the SEC concerning the deal.

East was wary of the move, He wrote that, in his view, "NVR has effectively taken a significant amount of land that they had already optioned with little risk to the balance sheet, and taken ownership of [it], thus introducing land risk into the business model. This is the second significant land deal NVR has done recently and while we doubt NVR is changing its stripes, it points to builders' needs to access well-located lots regardless of ownership structure. It also highlights no builder is immune to land risk."

Learn more about markets featured in this article: Washington, DC.